Symantec 2000 Annual Report Download - page 25

The sales and marketing expenses were approximately $307 mil-
lion, $286 million and $261 million in fiscal 2000, 1999 and 1998,
respectively. The absolute dollar increase in sales and marketing
expenses in fiscal 2000 as compared to fiscal 1999 is primarily
related to increased headcount and related salaries, commissions
and other performance-based compensation. The absolute dollar
increase in sales and marketing dollars for fiscal 1999 over fiscal
1998 is primarily due to increased headcount, as well as increased
spending in advertising and promotional expenses.
General and Administrative Expenses General and adminis-
trative expenses were 6%of net revenues in fiscal 2000 and 1999
and 7%of net revenues in fiscal 1998.
General and administrative expenses were approximately $42 mil-
lion, $36 million and $38 million in fiscal 2000, 1999 and 1998,
respectively. The absolute dollar increase in general and adminis-
trative expenses in fiscal 2000 as compared to fiscal 1999 was
primarily due to increases in salaries and benefits, legal fees and
write-offs of certain uncollectible receivables, offset by reductions
in certain consulting expenses incurred in fiscal 1999. General and
administrative expenses in absolute dollars decreased in fiscal
1999 as compared to fiscal 1998, primarily due to reductions in our
information system costs.
Amortization of Goodwill Amortization of goodwill increased
190%from approximately $6million in fiscal 1999 to $18 million in
fiscal 2000. The increase is primarily related to the acquisitions
in fiscal 2000 and 1999. Amortization of goodwill in fiscal 2000 is
primarily related to amortization of goodwill associated with the
acquisitions of Quarterdeck, URLabs and IBM’s anti-virus busi-
ness with amortization of approximately $10 million, $5million
and $2million, respectively.
Acquired In-Process Research and Development Expenses In
fiscal 2000 we acquired URLabs and L-3Network Security’s oper-
ations. In fiscal 1999, we acquired IBM’s and Intel’s anti-virus
businesses, Binary’s operations and Quarterdeck.
We wrote-off approximately $4 million and $28 million of acquired
in-process research and development associated with these acqui-
sitions in fiscal 2000 and 1999, respectively. These write-offs were
necessary because the acquired technologies had not yet reached
technological feasibility and there were no alternative uses.
We are using the acquired in-process research and development
associated with the fiscal 2000 acquisitions to create Internet
security intrusion detection, vulnerability assessment, new anti-
virus products and enhanced management and administrative
capabilities to be integrated into our products over the next year.
There were no acquired in-process research and development
expenses in fiscal 1998.
The efforts required to develop the acquired in-process technology
principally relate to the completion of all planning, designing,
development and testing activities that are necessary to establish
that the product or service can be produced to meet its design
specifications including features, functions and performance. We
expect the acquired in-process technology to be developed into
commercially feasible products. However, there are no assur-
ances that this will occur. If we fail to complete these products in
their entirety, or in a timely manner, we may not continue to attract
new users, we may be unable to retain our existing users and the
value of the other intangible assets may become impaired.
We determined the fair value of the acquired in-process technol-
ogy for each of the purchases by estimating the projected cash
flows related to these projects, including the cost to complete the
acquired in-process technologies and future revenues to be earned
upon commercialization of the products. We discounted the result-
ing cash flows back to their net present values. We based the net
cash flows from such projects on our analysis of the respective
markets and estimates of revenues and operating profits related
to these projects.
A valuation specialist used our estimates to establish the amount
of acquired in-process research and development to be written off
for these acquisitions in fiscal 2000 and 1999. As a result, we
wrote-off $3.1million and $1.2million in connection with our
acquisitions of L-3Network Security and URLabs, respectively, in
fiscal 2000 using the following analyses:
L-3Network Security This discussion contains forward-looking
statements of certain aspects of our future operating results from
the operations of L-3 Network Security (“L-3”). Actual results may
differ from the estimates expressly or implicitly referred to by
these forward-looking statements.
The in-process technology acquired in the L-3acquisition consisted
primarily of research and development related to the next gener-
ation of Retriever and Expert. Retriever and Expert products are
designed for assisting enterprises in vulnerability assessment.
L-3’s research and development was focused on providing more
robust features in its development of the next generation products
of Retriever and Expert. We plan on discontinuing sales of the
Expert product since many of its functionalities are expected to be
largely superseded by the next generation of Retriever.
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